MR Microinsurance_2012_03_29.indd - International Labour ...

Microinsurance and climate change
4.5 Conclusion
109
To adapt to changing climate conditions and cope with the resulting disasters,
the international community has pledged substantial funds to finance adaptation
measures. The “fast-track” money of US$10 billion per year approved in 2009 is
to be increased to US$100 billion per year by 2020. The first funds from this
resource were allocated by the relevant ministries in 2010 (Wiedmaier-Pfister et
al., 2009). This chapter has identified a number of areas where such funds could
be used or invested to enhance the effectiveness of microinsurance in the context
of climate change, including improved weather infrastructure, technical assistance
to improve product design, awareness raising about the role of insurance in
managing climate change risks, and subsidies to enable schemes to start and scale
up quickly.
All microinsurance schemes, regardless of what risks they cover, need to assess
how their claims experience might change in the future because of the impact of
climate change. Technical assistance from climate change experts may enable
agricultural, life or health insurance schemes to understand how their risk profiles
may evolve over time, and what steps they can take to manage those risks,
including accessing reinsurance.
Insurance schemes that have tried to tackle weather and disaster risks at the
micro level have not managed to achieve scale without government subsidies.
Certainly premium subsidies and smart subsidies for research, product development
and consumer education would be a welcome use of these funds to
improve the effectiveness of index-based weather insurance. Additional investments
could support innovative efforts to overcome key challenges, such as
remote sensing and experimentation with hybrid approaches to reduce basis risk,
and designing effective yet understandable triggers.
Similarly, greater experimentation with meso- and macro-level interventions
is warranted to explore alternative approaches to reducing the vulnerability of the
poor to risks associated with climate change. While not specifically microinsurance,
interventions at the meso or macro levels may be a more effective means of
protecting the poor from natural disasters. Funds should also be used to increase
key stakeholders’ awareness of the roles they could play to enhance the effectiveness
of insurance as a tool for climate change adaptation, including the creation
of public-private partnerships.
At operational level, the insurance of weather risks is a difficult but important
issue for microinsurers to tackle. Technical assistance could help these organizations
to overcome challenges and implement the guidance described in this
chapter, including: